Q&A Hero

Q: Presented below are several figures reported for Plate Corporation and Saucer Industries as of December 31, 2011. Plate has owned 70% of Saucer for the past five years, and at the time of purchase, the book value of Saucer's assets and liabilities equaled the fair value. The cost of the 70% investment was equal to 70% of the book value of Saucer's net assets. At the time of purchase, the fair values and book values of Saucer's assets and liabilities were equal. Plate Saucer Inventory $120,000 $60,000 Sales 200,000 140,000 Cost of Goods Sold 130,000 80,000 Expenses 40,000 30,000 In 2010, Saucer sold inventory to Plate which had cost $40,000 for $60,000. 25% of this inventory remained on hand at December 31, 2010, but was sold in 2011. In 2011, Saucer sold inventory to Plate which had cost $30,000 for $45,000. 40% of this inventory remained unsold at December 31, 2011. Required: Calculate following balances at December 31, 2011. a. Consolidated Sales b. Consolidated Cost of goods sold c. Consolidated Expenses d. Noncontrolling interest share of Saucer's net income e. Consolidated Inventory

Q: Commodity and derivative markets allow firms to adjust their _________. A. management styles B. focus from their main line of business to their investment portfolios C. ways of doing business so that they"ll always have positive returns D. exposure to various business risks

Q: A common feature of regulated industries is cross-subsidization, which is a situation when one group of customers pays prices above costs while another group of customers pays prices below costs. The one group is subsidizing the other group. Is this practice more consistent with the capture hypothesis or the share-the-gains, share-the-pains theory? Explain.

Q: The value of a derivative security _________. A. depends on the value of another related security B. affects the value of a related security C. is unrelated to the value of a related security D. can be integrated only by calculus professors

Q: Pastern Industries has an 80% ownership stake in Sascon Incorporated. At the time of purchase, the book value of Sascon's assets and liabilities were equal to the fair value. The cost of the 80% investment was equal to 80% of the book value of Sascon's net assets. At the end of 2011, they issued the following consolidated income statement: Sales $930,000 Cost of sales (470,000) Operating expenses (202,000) Noncontrolling interest share (23,000) Controlling interest share $235,000 Shortly after the statements were issued, Pastern discovered that the 2011 intercompany sales transactions had not been properly eliminated in consolidation. In fact, Pastern had sold inventory that cost $80,000 to Sascon for $90,000, and Sascon had sold inventory that cost $50,000 to Pastern for $65,000. Half of the products from both transactions still remained in inventory at December 31, 2011. Required: Prepare a corrected income statement for Pastern and Subsidiary for 2011.

Q: Which of the following is the reason why the product incompatibility strategy worked for Appleʹs iPod in the media industry but did not work for Sonyʹs Beta videocassettes in the videocassette industry?A) Both media and videocassette industries were subject to positive market feedback.B) Both media and videocassette industries were subject to negative market feedback.C) The media industry was subject to positive feedback but the videocassette industry was subject to negative market feedback.D) The media industry was subject to negative market feedback but the videocassette industry was subject to positive market feedback.

Q: __________ represents an ownership share in a corporation. A. A call option B. Common stock C. A fixed-income security D. Preferred stock

Q: Proman Manufacturing owns a 90% interest in Sipp Company, purchased at a time when the book values of Sipp's recorded assets and liabilities were equal to fair values. During 2011, Sipp sold merchandise to Proman for $80,000 at a 20% gross profit. At December 31, 2011, 25% of this merchandise is still in Proman's inventory. Separate incomes for Proman and Sipp are summarized as follows: Proman Sipp Sales $900,000 $200,000 Cost of sales 400,000 100,000 Gross profit 500,000 100,000 Operating expenses 200,000 80,000 Separate income $300,000 $ 20,000 Required: Prepare a consolidated income statement for 2011 for Proman and subsidiary.

Q: Monopolies and oligopolies both erect barriers to entry through the use ofA) price cutting. B) patents. C) franchising. D) advertising.

Q: In a market economy, capital resources are primarily allocated by ____________. A. governments B. corporation CEOs C. financial markets D. investment bankers

Q: On January 1, 2011, Palling Corporation purchased 70% of the common stock of Sam's Storage Systems for $320,000 when Sam's had Common Stock outstanding of $100,000 and Retained Earnings of $200,000. Any excess differential was attributed to goodwill. At the end of 2011, Palling and Sam's had unrealized inventory profits from intercompany sales of $6,000 and $8,000, respectively. These year-end profit amounts were realized in 2012. At the end of 2012, Palling held inventory acquired from Sam's with a $10,000 unrealized profit. Palling reported separate income of $100,000 for 2012 and paid dividends of $30,000. Sam's reported separate income of $70,000 for 2012 and paid dividends of $20,000. Required: Compute the controlling interest share of consolidated net income for 2012.

Q: The demand curve for the product of a monopolistic competitorA) is the same as the market demand curve. B) is horizontal.C) is vertical.D) slopes downward.

Q: __________ portfolio construction starts with selecting attractively priced securities. A. Bottom-up B. Top-down C. Upside-down D. Side-to-side

Q: Plover Corporation acquired 80% of Sink Inc. equity on January 1, 2010, when the book values of Sink's assets and liabilities were equal to their fair values. The cost of the investment was equal to 80% of the book value of Sink's net assets. Plover separate income (excluding Sink) was $1,800,000, $1,700,000 and $1,900,000 in 2010, 2011 and 2012 respectively. Plover sold inventory to Sink during 2010 at a gross profit of $48,000 and one quarter remained at Sink at the end of the year. The remaining 25 percent was sold in 2011. At the end of 2011, Plover has $25,000 of inventory received from Sink from a sale of $100,000 which cost Sink $80,000. There are no unrealized profits in the inventory of Plover or Sink at the end of 2012. Plover uses the equity method in its separate books. Select financial information for Sink follows: 2010 2011 2012 Sales $790,000 $840,000 $940,000 Cost of Sales (420,000) (440,000) (500,000) Gross Profit 370,000 400,000 440,000 Operating Expenses (300,000) (320,000) (350,000) Net Income $ 70,000 $ 80,000 $ 90,000 Required: Prepare a schedule to determine the controlling interest share of the consolidated net income for 2010, 2011, and 2012.

Q: PQMRMC$720$12$2$621$14$5$522$16$10$423$18$15$324$20$20$225$22$26Refer to the above table. Given the demand and cost schedules, what is the profit -maximizing price for this monopolist?A) $3 B) $4 C) $6 D) $7

Q: __________ is (are) real assets. A. Bonds B. Production equipment C. Stocks D. Life insurance

Q: Papal Corporation acquired an 80% interest in Sandman Corporation at a cost equal to 80% of the book value of Sandman's net assets in 2010. At the time of the acquisition, the book values and fair values of Sandman's assets and liabilities were equal. During 2011, Papal recorded sales of $440,000 of merchandise to Sandman at a gross profit rate of 30%. Sandman's beginning and ending inventories for 2011 were $60,000 and $80,000, respectively. Income statement information for both companies for 2011 is as follows: Papal Sandman Sales Revenue $1,660,000 $580,000 Invest.income from Sandman 59,600 Cost of Goods Sold (1,060,000) (394,000) Expenses (358,000) (104,000) Net Income $301,600 $82,000 Required: Prepare a consolidated income statement for Papal Corporation and Subsidiary for 2011.

Q: The long-run supply curve in a constant-cost, perfectly competitive industry isA) perfectly inelastic. B) upward sloping.C) downward sloping. D) perfectly elastic.

Q: _____ is a mechanism for mitigating potential agency problems. A. Tying income of managers to success of the firm B. Directors defending top management C. Antitakeover strategies D. All of the options.

Q: Pittle Corporation acquired a 80% interest in Seel Corporation at a cost equal to 80% of the book value of Seel's net assets several years ago. At the time of purchase, the fair value and book value of Seel's assets and liabilities were equal. Pittle purchases its entire inventory from Seel at 150% of Seel's cost. During 2011, Seel sold $490,000 of merchandise to Pittle. Pittle's beginning and ending inventories for 2011 were $72,000 and $66,000, respectively. Income statement information for both companies for 2011 is as follows: Pittle Seel Sales Revenue $ 820,000 $440,000 Investment income from Sitt 145,600 Cost of Goods Sold (460,000) (165,000) Expenses (120,000) (95,000) Net Income $ 385,600 $ 180,000 Required: Prepare a consolidated income statement for Pittle Corporation and Subsidiary for 2011.

Q: A firm seeking to maximize economic profits should produce at the output at whichA) total revenue equals total cost.B) marginal revenue equals marginal cost. C) average revenue equals average cost.D) marginal revenue equals average revenue.

Q: Which of the following is an example of an agency problem? A. Managers engage in empire building. B. Managers protect their jobs by avoiding risky projects. C. Managers overconsume luxuries such as corporate jets. D. All of the options are examples of agency problems.

Q: Peel Corporation acquired a 80% interest in Sitt Corporation at a cost equal to 80% of the book value of Sitt several years ago. At the time of purchase, the fair value and book value of Sitt's assets and liabilities were equal. Sitt purchases its entire inventory from Peel at 150% of Peel's cost. During 2011, Peel sold $190,000 of merchandise to Sitt. Sitt's beginning and ending inventories for 2011 were $72,000 and $66,000, respectively. Income statement information for both companies for 2011 is as follows: Peel Sitt Sales Revenue $820,000 $440,000 Investment income from Sitt 146,000 Cost of Goods Sold (460,000) (165,000) Expenses (120,000) (95,000) Net Income $386,000 $180,000 Required: Prepare a consolidated income statement for Peel Corporation and Subsidiary for 2011.

Q: Which of the following is NOT correct?A) MC = change in TC/change in Q B) ATC = TC/QC) AVC = TVC/Q D) ATC + AVC = AFC

Q: Security selection refers to the ________. A. allocation of the investment portfolio across broad asset classes B. analysis of the value of securities C. choice of specific securities within each asset class D. top-down method of investing

Q: PreBuild Manufacturing acquired 100% of Shoding Industries common stock on January 1, 2010, for $670,000 when the book values of Shoding's assets and liabilities were equal to their fair values and Shoding's stockholders' equity consisted of $380,000 of Capital Stock and $290,000 of Retained Earnings. PreBuild's separate income (excluding investment income from Shoding) was $870,000, $830,000 and $960,000 in 2010, 2011 and 2012, respectively. PreBuild sold inventory to Shoding during 2010 at a gross profit of $50,000 and 50% remained at Shoding at the end of the year. The remaining 50% was sold in 2011. At the end of 2011, PreBuild has $54,000 of inventory received from Shoding from a sale of $180,000 which cost Shoding $150,000. There are no unrealized profits in the inventory of PreBuild or Shoding at the end of 2012. PreBuild uses the equity method in its separate books. Select financial information for Shoding follows: 2010 2011 2012 Sales $890,000 $995,000 $1,020,000 Cost of Sales (420,000) (475,000) (505,000) Gross Profit 470,000 520,000 515,000 Operating Expenses (350,000) (380,000) (390,000) Net Income $120,000 $140,000 $125,000 Required: Prepare a schedule to determine PreBuild Manufacturing's Consolidated net income for 2010, 2011, and 2012.

Q: According to efficient market theory, which of the following can best predict the stock price of a particular company tomorrow? A) a finance professor who knows a lot of investment theory B) a stock trader who has traded stocks for more than 10 years C) that companyʹs employee who has inside information about the company D) none of the above: Everyone has an equal chance of predicting future stock prices

Q: Which one of the following best describes the purpose of derivatives markets? A. Transferring risk from one party to another. B. Investing for a short time period to earn a small rate of return. C. Investing for retirement. D. Earning interest income.

Q: Pexo Industries purchases the majority of their raw materials from a wholly-owned subsidiary, Springmade Chemicals. Pexo purchased Springmade to assure supply availability at a time when the materials were being rationed in the industry due to supply issues overseas. Pexo was able to purchase Springmade at the book value of Springmade's net assets. At the time of purchase, the book value and fair value of Springmade's net assets were equal. Pexo purchased $2,890,000 of materials from Springmade in 2011 alone. All intercompany sales are made at 120% of cost, although Springmade is able to mark up their products 80% to other outside buyers. Pexo carried inventory on their books at the beginning and end of the year in the amount of $450,000 and $480,000, respectively, all of which had been purchased from Springmade. Income statement information for both companies for 2011 is as follows: Pexo Springmade Sales Revenue $3,793,000 $4,441,000 Investment income from Springmade 245,000 Cost of Goods Sold (3,139,000) (3,270,000) Expenses (257,000) (921,000) Net Income $642,000 $250,000 Required: Prepare a consolidated income statement for Pexo Corporation and Subsidiary for 2011.

Q: Asset allocation refers to _________. A. the allocation of the investment portfolio across broad asset classes B. the analysis of the value of securities C. the choice of specific assets within each asset class D. none of the options

Q: Which of the following is not an advantage of a partnership? A) Limited liability B) Easy to form C) Profits are subject to only personal taxation D) Permits more effective specialization in occupations

Q: Preen Corporation acquired a 60% interest in Shino Corporation at a cost equal to 60% of the book value of Shino's net assets in 2010. At the time of acquisition, the book value and fair value of Shino's assets and liabilities were equal. During 2011, Preen sold $120,000 of merchandise to Shino. All intercompany sales are made at 150% of Preen's cost. Shino's beginning and ending inventories resulting from intercompany sales for 2011 were $60,000 and $36,000, respectively. Income statement information for both companies for 2011 is as follows: Preen Shino Sales Revenue $730,000 $262,000 Investment income from Shino 38,000 Cost of Goods Sold (319,000) (172,000) Expenses (165,000) (40,000) Net Income $284,000 $50,000 Required: Prepare a consolidated income statement for Preen Corporation and Subsidiary for 2011.

Q: If an individualʹs total utility from consuming two goods decreases, then there must beA) a downward rotation of the individualʹs indifference curve.B) an inward rotation of the individualʹs indifference curve. C) an outward shift of the individualʹs indifference curve.D) an inward shift of the individualʹs indifference curve.

Q: __________ are examples of financial intermediaries. A. Commercial banks B. Insurance companies C. Investment companies D. All of the options

Q: Perry Instruments International purchased 75% of the outstanding common stock of Standard Systems in 1997 when the book values and fair values of Standard's assets and liabilities were equal. The cost of Perry's investment was equal to 75% of the book value of Standard's net assets. Separate company income statements for Perry and Standard for the year ended December 31, 2011 are summarized as follows: Perry Standard Sales Revenue $2,400,000 $800,000 Investment income from Standard 142,000 Cost of Goods Sold (1,600,000) (400,000) Expenses (450,000) (200,000) Net Income $492,000 $200,000 During 2011, the companies began to manage their inventory differently, and worked together to keep their inventories low at each location. In doing so, they agreed to sell inventory to each other as needed at a markup of 10% of cost. Perry sold merchandise that cost $100,000 to Standard for $110,000, and Standard sold inventory that cost $80,000 to Perry for $88,000. Half of this merchandise remained in each company's inventory at December 31, 2011. Required: Prepare a consolidated income statement for Perry Corporation and Subsidiary for 2011.

Q: Which of the following are financial assets? I. Debt securities II. Equity securities III. Derivative securities A. I only B. I and II only C. II and III only D. I, II, and III

Q: QuantityTotal Utility00115235355475585690Refer to the above table. At what quantity does diminishing marginal utility set in?A) 1st. B) After 4. C) After 5. D) After 6.

Q: Pfeifer Corporation acquired an 80% interest in Stern Corporation several years ago when the book values and fair values of Stern's assets and liabilities were equal. At the time of acquisition, the cost of the 80% interest was equal to 80% of the book value of Stern's net assets. Separate company income statements for Pfeifer and Stern for the year ended December 31, 2011 are summarized as follows: Pfeifer Stern Sales Revenue $1,000,000 $600,000 Investment income from Stern 85,000 Cost of Goods Sold (600,000) (300,000) Expenses (200,000) (200,000) Net Income $285,000 $100,000 During 2010, Pfeifer sold merchandise that cost $120,000 to Stern for $180,000. Half of this merchandise remained in Stern's inventory at December 31, 2010. During 2011, Pfeifer sold merchandise that cost $150,000 to Stern for $225,000. One-third of this merchandise remained in Stern's December 31, 2011 inventory. Required: Prepare a consolidated income statement for Pfeifer Corporation and Subsidiary for 2011.

Q: MonthPXQXPYQYPZQZJan$10100$2050$25200Feb1090186025225Mar1070159025275Apr12501510025290May15251512025320In the above table, the cross price elasticity of demand for good X with good Y when P Y falls from $20 to $18 isA) -2. B) 0. C) +1. D) -1.

Q: __________ assets generate net income to the economy, and __________ assets define allocation of income among investors. A. Financial, financial B. Financial, real C. Real, financial D. Real, real

Q: Psalm Enterprises owns 90% of the outstanding voting stock of Solomon Siding, which was purchased at a cost equal to 90% of the book value of Solomon's net assets many years ago. (At the time of purchase, the fair value and book value of Solomon's net assets were equal.) Psalm purchases merchandise from Solomon at 110% above Solomon's cost. In 2012, intercompany sales from Solomon to Psalm amounted to $362,000. Unrealized profits in Psalm's December 31, 2011 inventory and December 31, 2012 inventory were $82,000 and $26,000, respectively. Solomon reported net income of $980,000 for 2012. Required: 1. Determine Psalm's income from Solomon for 2012. 2. In General Journal format, prepare consolidation working paper entries at December 31, 2012 to eliminate the effects of the intercompany inventory sales assuming the perpetual inventory method is used.

Q: The actual value of the price elasticity of demand is alwaysA) positive because of the law of demand.B) negative because of the law of demand.C) positive because of diminishing marginal utility.D) negative because percentages can only be negative.

Q: Which of the following is not a money market security? A. U.S. Treasury bill B. 6-month maturity certificate of deposit C. common stock D. All of the options.

Q: Pirate Transport bought 80% of the outstanding voting stock of Seaways Shipping at book value several years ago. (At the time of purchase, the fair value and book value of Seaways' net assets were equal.) Pirate sells merchandise to Seaways at 120% above Pirate's cost. Intercompany sales from Pirate to Seaways for 2012 were $450,000. Unrealized profits in Seaways' December 31, 2011 inventory and December 31, 2012 inventory were $17,000 and $15,000, respectively. Seaways reported net income of $750,000 for 2012. Required: 1. Determine Pirate's income from Seaways for 2012. 2. In General Journal format, prepare consolidation working paper entries at December 31, 2012 to eliminate the effects of the intercompany inventory sales assuming the perpetual inventory method is used.

Q: The idea that it takes 90 percent of your time to clean up the last 10 percent of your house illustrates thatA) the marginal cost of cleaning up slopes downward. B) the marginal cost of cleaning up slopes upward.C) the marginal benefit of cleaning up is constant.D) the marginal benefit of cleaning up slopes upward.

Q: The material wealth of society is determined by the economy's _________, which is a function of the economy's _________. A. investment bankers; financial assets B. investment bankers; real assets C. productive capacity; financial assets D. productive capacity; real assets

Q: Salli Corporation regularly purchases merchandise from their 90%-owner, Playtime Corporation. Playtime purchased the 90% interest at a cost equal to 90% of the book value of Salli's net assets. At the time of acquisition, the book values and fair values of Salli's assets and liabilities were equal. Playtime makes their sales to Salli at 120% of cost. In 2012, Salli reported net income of $460,000, and made purchases totaling $172,000 from Playtime. Although Salli had no inventory on hand at the beginning of 2012 that they had purchased from Playtime, at year end, they had $51,600 of this merchandise in inventory. Required: 1. Determine the unrealized profit in Salli's inventory at December 31, 2012. 2. Compute Playtime's income from Salli for 2012.

Q: Active trading in markets and competition among securities analysts helps ensure that: I. Security prices approach informational efficiency. II. Riskier securities are priced to offer higher potential returns. III. Investors are unlikely to be able to consistently find under- or overvalued securities. A. I only B. I and II only C. II and III only D. I, II, and III

Q: Which of the following statements is FALSE regarding the definition of poverty?A) A threshold income level is used to define poverty.B) Adjustments to the poverty level are made on the basis of changes in the Consumer Price Index.C) Real incomes in the United States have been growing at a compounded annual rate of almost 2 percent per capita.D) Poverty cannot be defined in relative terms.

Q: Penguin Corporation acquired a 60% interest in Squid Corporation on January 1, 2012, at a cost equal to 60% of the book value of Squid's net assets. At the time of the acquisition, the book values of Squid's assets and liabilities were equal to the fair values. Squid reports net income of $880,000 for 2012. Penguin regularly sells merchandise to Squid at 120% of Penguin's cost. The intercompany sales information for 2012 is as follows: Intercompany sales at selling price $672,000 Sales value of merchandise unsold by Squid $132,000 Required: 1. Determine the unrealized profit in Squid's inventory at December 31, 2012. 2. Compute Penquin's income from Squid for 2012.

Q: According to the Flow of Funds Accounts of the United States, the largest financial asset of U.S. households is ____. A. mutual fund shares B. corporate equity C. pension reserves D. deposits

Q: Quantity of LaborHourly Wage RateTotal Marginal Wage Bill Factor Cost0-- -1$10 212 314 416 518 620 In the above table, what is the marginal factor cost of the 2nd worker?A) $24 B) $14 C) $64 D) $12

Q: Shalles Corporation, a 80%-owned subsidiary of Pani Corporation, sold inventory items to its parent at a $48,000 profit in 2012. Pani resold one-third of this inventory to outside entities. Shalles reported net income of $200,000 for 2012. Noncontrolling interest share of consolidated net income that will appear in the income statement for 2012 is A) $30,400. B) $32,000. C) $33,600. D) $40,000.

Q: ____ is not a derivative security. A. A share of common stock B. A call option C. A futures contract D. None of the options (All of the answers are derivative securities.)

Q: For the past several decades, union membership in the United States has been declining. What has been happening in the rest of the world?A) Union membership has been increasing in almost every other country. B) In almost every other nation, union membership has held constant.C) In most cases, union membership in other nations has also been falling. D) We do not know because other nations do not keep these statistics.

Q: A parent company regularly sells merchandise to its 70%-owned subsidiary. Which of the following statements describes the computation of noncontrolling interest share? A) The subsidiary's net income times 30% B) (The subsidiary's net income 30%) + unrealized profits in the beginning inventory - unrealized profits in the ending inventory C) (The subsidiary's net income + unrealized profits in the beginning inventory - unrealized profits in the ending inventory) 30% D) (The subsidiary's net income + unrealized profits in the ending inventory - unrealized profits in the beginning inventory) 30%

Q: Number of WorkersTotal OutputNumber of WorkersTotal Output0065401100760022208650332096904400107005475 According to the above table, if the price of the good produced is $5 and the wage rate is $400, then the marginal revenue product of the 7th worker isA) $300. B) $60. C) $12. D) $400.

Q: Use the following information to answer the question(s) below..Pelga Company routinely receives goods from its 80%-owned subsidiary, Swede Corporation. In 2011, Swede sold merchandise that cost $80,000 to Pelga for $100,000. Half of this merchandise remained in Pelga's December 31, 2011 inventory. This inventory was sold in 2012. During 2012, Swede sold merchandise that cost $160,000 to Pelga for $200,000. $62,500 of the 2012 merchandise inventory remained in Pelga's December 31, 2012 inventory. Selected income statement information for the two affiliates for the year 2012 was as follows:Pelga SwedeSales Revenue $500,000 $400,000Cost of Goods Sold 400,000 320,000Gross profit $100,000 $80,000What amount of unrealized profit did Pelga Company have at the end of 2012?A) $10,000B) $12,500C) $50,000D) $62,500

Q: Explain the capture hypothesis.

Q: Net worth represents _____ of the liabilities and net worth of commercial banks. A. about 51% B. about 91% C. about 11% D. about 31%

Q: Which of the following would NOT be an adequate description of the relationship between Blu-Ray discs and Blu-Ray disc players?A) They are compatible. B) They are complementary.C) They involve network effects. D) They are substitutable.

Q: Real assets in the economy include all but which one of the following? A. land B. buildings C. consumer durables D. common stock

Q: On January 1, 2011, Plastam Industries acquired an 80% interest in Sparta Company to assure a steady supply of Sparta's inventory that Plastam uses in its own manufacturing businesses. Sparta sold 100% of its output to Plastam during 2011 and 2012 at a markup of 125% of Sparta's cost. Plastam had $12,000 of these items remaining in its inventory at December 31, 2012. If Plastam neglected to eliminate unrealized profits from all intercompany sales from Sparta, the inventory on the consolidated balance sheet at December 31, 2012 was A) overstated by $1,920. B) understated by $1,920. C) overstated by $2,400. D) understated by $2,400.

Q: The most common reason for the existence of oligopolies isA) ease of entry. B) economies of scale. C) diseconomies of scale. D) advertising.

Q: Financial assets represent _____ of total assets of U.S. households. A. over 70% B. over 90% C. under 10% D. about 30%

Q: Use the following information to answer the question(s) below.Pew Corporation acquired 80% ownership of Sordid Incorporated, at a time when Pew's investment cost was equal to 80% of Sordid's book value. At the time of acquisition, the book values and fair values of Sordid's assets and liabilities were equal. Pew uses the equity method. During 2011, Pew sold goods to Sordid for $160,000 making a gross profit percentage of 20%. Half of these goods remained unsold in Sordid's inventory at the end of the year. Income statement information for Pew and Sordid for 2011 were as follows:Pew SordidSales Revenue $800,000 $300,000Cost of Goods Sold 500,000 160,000Operating Expenses 200,000 80,000Separate incomes $100,000 $60,000The 2011 consolidated income statement showed noncontrolling interest share ofA) $3,200.B) $6,400.C) $8,800.D) $12,000.

Q: The demand curve for the product of a monopolistically competitive firm slopes downward becauseA) products are perceived by consumers as different. B) products are homogeneous.C) people only care about price when they buy a good. D) the firmʹs goal is to maximize profits.

Q: PQMRMC$720$12$2$621$14$5$522$16$10$423$18$15$324$20$20$225$22$26Refer to the above table. Given the demand and cost schedules, what is the profit maximizing quantity for this monopolist?A) 23 B) 21 C) 20 D) 24

Q: If the costs of production do not increase as output increases in the long run in a perfectly competitive industry, then this is aA) constant-return-to-scale industry. B) constant-competitive industry. C) constant-cost industry. D) constant-price industry.

Q: Use the following information to answer the question(s) below.Pouch Corporation acquired an 80% interest in Shenley Corporation on January 1, 2012, when the book values of Shenley's assets and liabilities were equal to their fair values. The cost of the 80% interest was equal to 80% of the book value of Shenley's net assets. During 2012, Pouch sold merchandise that cost $70,000 to Shenley for $86,000. On December 31, 2012, three-fourths of the merchandise acquired from Pouch remained in Shenley's inventory. Separate incomes (investment income not included) of the two companies are as follows:Pouch ShenleySales Revenue $180,000 $160,000Cost of Goods Sold 120,000 90,000Operating Expenses 17,000 21,000Separate incomes $ 43,000 $ 49,000Swamp Co., a 55%-owned subsidiary of Pond Inc., made the following entry to record a sale of merchandise to Pond:Accounts Receivable 40,000Sales Revenue 40,000All Swamp sales are at 125% of cost. One-fourth of this merchandise remained in the Pond's inventory at year-end. A working paper entry to eliminate unrealized profits from consolidated inventory would include a credit to Inventory in the amount ofA) $2,000.B) $2,500.C) $8,000.D) $10,000.

Q: When MR < MC for a firm, the firm shouldA) reduce its level of output. B) stay at the same level of output.C) stop producing. D) increase output, unless P < AVC.

Q: The marginal cost curve always intersects the average total cost curve at the point at which the average total cost curveA) is zero. B) is at its minimum. C) is at its maximum. D) has a vertical slope.

Q: ʺInside informationʺ is the use of informationA) by those who read the companiesʹ annual reports.B) by those who write the companiesʹ annual reports. C) by stockbrokers at the largest brokerage firms.D) that is not available to the public.

Q: If the intercompany sale was an upstream sale, the total amount of consolidated cost of goods sold for 2012 will be A) $300,000. B) $430,000. C) $470,000. D) $477,000.

Q: In a partnership, debts accumulated by one partner areA) the responsibility of that partner only.B) the responsibility of that partner plus any partners who are actively involved in running the partnership.C) the responsibility of all of the other partners for the full amount of the debt. D) the responsibility of all of the other partners, up to the total value of the firm.

Q: Use the following information to answer the question(s) below.Paggle Corporation owns 80% of Spillway Inc.'s common stock that was purchased at its underlying book value. At the time of purchase, the book value and fair value of Spillway's net assets were equal. The two companies report the following information for 2011 and 2012.During 2011, one company sold inventory to the other company for $50,000 which cost the transferor $40,000. As of the end of 2011, 30% of the inventory was unsold. In 2012, the remaining inventory was resold outside the consolidated entity.2011 Selected Data: Paggle SpillwaySales Revenue $600,000 $320,000Cost of Goods Sold 320,000 155,000Other Expenses 100,000 89,000Net Income $180,000 $76,000Dividends Paid 19,000 02012 Selected Data: Paggle SpillwaySales Revenue $580,000 $445,000Cost of Goods Sold 300,000 180,000Other Expenses 130,000 171,000Net Income $150,000 $94,000Dividends Paid 16,000 5,000If the intercompany sale mentioned above was an upstream sale, what will be the reported amount of total consolidated sales revenue for 2012?A) $1,025,000B) $1,900,000C) $1,950,000D) $2,000,000

Q: If an individualʹs total utility from consuming two goods increases, then there must beA) a downward rotation of the individualʹs indifference curve. B) an inward rotation of the individualʹs indifference curve.C) an outward shift of the individualʹs indifference curve. D) an inward shift of the individualʹs indifference curve.

Q: Which economic principle accounts for the fact that all-you-can-eat buffet restaurants can be profitable?A) The law of demandB) The principle of diminishing marginal utility C) The principle of diminishing marginal product D) The law of supply

Q: The cross price elasticity of demand is measured by theA) percentage change in the quantity demanded of one good divided by the percentage change in quantity demanded of another good.B) percentage change in the price of one good divided by the percentage change in price of another good.C) percentage change in the demand for one good divided by the percentage change in price of another good.D) percentage change in the price of one good divided by the percentage change in the demand for another good.

Q: The price elasticity of demand is measured by theA) percentage change in quantity demanded divided by the percentage change in price.B) percentage change in price divided by the percentage change in quantity demanded. C) change in quantity demanded divided by the change in price.D) change in price divided by the change in quantity demanded.